Evaluating a venture capital fund goes beyond reading the pitch deck. For Limited Partners (LPs), true due diligence means scrutinising the financial model, questioning internal valuations, and spotting hidden conflicts of interest.



In Part 2 of our deep dive into VC investing, Justin Lim, Managing Partner at Nexea Ventures, returns to share his view on fund assessment. He explains how to "stress test" a fund's financial model, why consistency is the biggest indicator of a manager's character, and why DPI matters, but also the role of paper gains and IRRs.



We discuss:


How to "stress test" a VC fund's financial model and assumptions.


Why LPs must look beyond paper-based IRR and focus on cash returns (DPI).


The red flags of inconsistency: assessing a fund manager's true character.


Why portfolio valuations are often subjective and how to challenge them.


Identifying conflicts of interest like "front running" and hidden favors.



Justin’s Book Recommendations for Investors:


Thinking in Bets by Annie Duke


The Signal and the Noise by Nate Silver


Competing Against Luck by Clayton Christensen


The Caesar's Palace Coup by Sujeet Indap and Max Frumes


Superforecasting by Philip Tetlock

Evaluating a venture capital fund goes beyond reading the pitch deck. For Limited Partners (LPs), true due diligence means scrutinising the financial model, questioning internal valuations, and spotting hidden conflicts of interest.In Part 2 of our deep dive into VC investing, Justin Lim, Managing Partner at Nexea Ventures, returns to share his view on fund assessment. He explains how to "stress test" a fund's financial model, why consistency is the biggest indicator of a manager's character, and why DPI matters, but also the role of paper gains and IRRs.We discuss:<ul><li>How to "stress test" a VC fund's financial model and assumptions.</li><li>Why LPs must look beyond paper-based IRR and focus on cash returns (DPI).</li><li>The red flags of inconsistency: assessing a fund manager's true character.</li><li>Why portfolio valuations are often subjective and how to challenge them.</li><li>Identifying conflicts of interest like "front running" and hidden favors.Justin’s Book Recommendations for Investors:</li><li>Thinking in Bets by Annie Duke</li><li>The Signal and the Noise by Nate Silver</li><li>Competing Against Luck by Clayton Christensen</li><li>The Caesar's Palace Coup by Sujeet Indap and Max Frumes</li><li>Superforecasting by Philip Tetlock</li></ul>

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